Shares in the company extended gains to 5.6% after the results, and the company said it was positive on the outlook although rising input prices and higher interest rates were a cause for concern.

“Their margins have slightly improved, probably because of better operating leverage and cost control. The main concern remains raw material cost pressures and if they can sustain these margins,” a sector analyst at Mumbai’s Angel Broking said.

Mahindra said net profit, including a one-time gain, for the fiscal third-quarter ended 31 Dec. stood at Rs735 crore ($162 million) from Rs410 crore a year earlier.

Excluding the one-time gain of Rs117 crore on exercise of a put option the company held on a long term investment, profit rose 49% to Rs617 crore.

Net sales rose 36% to Rs6074 crore.

A Reuters poll of brokerages had forecast net profit of Rs659 crore on net sales of Rs4490 crore.

Mahindra sold 56,211 utility vehicles during the quarter, and held a market share of 62% in the segment.

Operating margin for the quarter was around 15%, slightly better from a year earlier, analysts said.

Mahindra expects to take full control of South Korea’s Ssangyong Motor by April. It bought the SUV maker last year for 522.5 billion won ($468.4 million) to access advanced technologies and gain a foothold in the southeast Asian market.

Outlook

Auto sales in India touched a record high in January, defying expectations of a slowdown, powered by a growing middle class, easier access to loans and a wider choice of models.

Vehicle sales in India, one of the fastest growing auto markets in the world, grew 31% in 2010, but that growth was expected to slump to 15% this year amid rising interest rates, fuel prices and vehicle costs.

Leading carmaker Maruti Suzuki lagged market estimates to report an 18% decline in quarterly profit, while largest motorcycle maker Hero Honda posted a 20% fall in profit and said margins would remain under pressure in the short term.

“While the demand remains robust, the recent hardening in the prices of commodities and oil causes a degree of concern,” Mahindra said in a statement.

“The measures adopted by the Reserve Bank of India to combat inflation will necessarily result in tighter liquidity and further possibility of interest costs moving upwards,” it added.

Shares in Mahindra, valued at about $8.8 billion, were trading 5% higher at 0816 GMT, in a firm Mumbai market. The shares have fallen 16.7% so far this year, compared to the 18.8% decline in the sector index and a 13.3% fall in the main index.